Doug Wood GTE-CEER transit workshop Brussels, 24 January 2007 Doug Wood GTE-CEER transit workshop, 24 Jan 2007 European Federation of Energy Traders 1

Author Conference place and date 2 Gas Directive 2003/55/EC  Transmission applies to all downstream high-pressure pipes  Transmission includes transit pipes  TSO’s must provide non-discriminatory access  Regulators must ensure non-discriminatory access  New transit might be exempt  Old transit contracts remain valid => Regulators must examine capacity reservation in old contracts and ensure that terms and conditions for transit TPA are fair

Author Conference place and date 3 EFET views  Grandfathering: prior allocation of capacity under grandfathered LT contracts must not prevent access for new entrants.  Non-discrimination: historical transit contracts must not give preferential access to the transmission network through capacity substitutability, balancing aggregation etc.  Information: where only interruptible capacity is available, information on utilisation is of paramount importance. Gas Regulation should be enforced.  Capacity allocation: unused capacity must be offered to the market, e.g. in day-ahead auctions.  Congestion management: market-based measures preferred in ST; LT investment must take place on a timely basis.  Tariffs: should be consistent between grandfathered and new contracts; should not exceed a fair regulated rate.

Author Conference place and date 4 Comments on GTE Transit Report 2005  GTE defines one category of transit as exempted pipelines. Not completely clear that transit lines can be exempted. Article 22 specifies “interconnectors”.  The existence of two transit routes with different sources & different destinations does not automatically constitute competition and therefore exclusion from regulatory intervention over terms or tariffs. Competition cases usually consider choices between two specified points.  The existence of different balancing regimes was used to justify different tariffs for transport and transit – but flexibility products can be unbundled from transportation and transit and sold separately  Although different transit situations exist, markets will benefit from coherent solutions  GTE claim that long distance tariffs under Entry/Exit are low (though ERGEG recognises that pancaked tariffs can be high). Meshed systems do not always follow the notional path. The error can often be minimised through tariff design and does not invalidate Entry/Exit.  Agree that transit pipelines contribute to security of supply. Must address Governmental desire to construct additional capacity for supply security, in excess of what is valued by the market.

Author Conference place and date 5 Conclusions  In order to meet the principle of non-discrimination, legacy contracts must be moved to new system, or new users have right to request capacity on the same terms  Terms for aggregation of imbalances, substitutability of transit for transportation capacity must be transparent  Regulators must examine capacity reservation in old contracts and ensure that terms and conditions for transit TPA are fair  Solution must consider the impact on future investment incentives in a world concerned by supply security

Author Conference place and date 6 Thanks for your attention European Federation of Energy Traders Amstelveenseweg JS Amsterdam Tel: +31 (0)